Chile hikes interest rate to 7% amid inflation fight

Chile's central bank hiked the country's benchmark interest rate to 7 percent from 5.5 percent, Tuesday, as authorities around Latin America battle to bring down spiraling inflation.

The hike of 150 basis points follows a series of raises to tighten monetary policy since the middle of last year as the Andean copper producer's economy has bounced back strongly from the impact of the COVID-19 pandemic.

The bank said that future hikes could be smaller, however, if current assumptions about the economy are met. The latest hike was equal in size to the previous one in late January, which was the biggest raise in over two decades.

"Future increases in the MPR (monetary policy rate) could be less than those made in recent quarters," the bank said in a statement. "Though this will depend on the evolution of the macroeconomic scenario."

Market operators had estimated the rate would rise to 7.5 percent, while analysts polled by Reuters had expected it to reach 7.25 percent.

Chile's economy has been boosted by government aid to households to counteract the impact of the coronavirus pandemic, as well as by partial withdrawals of savings in pension funds.

However, the galloping recovery has generated strong pressure on consumer prices. The bank said annualized inflation was getting towards 10 percent and that it would continue to monitor what happens with prices. (Reuters)